Comment by abeppu | Hacker News Reader

Comment by abeppu | Hacker News Reader

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Of the criticisms to Piketty, not having done the math isn't really one of them.

I don't have Capital and Ideology close at hand, so I can't check how he worked it out, but consulting some other sources:

- the top 1% in the US apparently have around $45.7T in wealth [1]

- there are around 22M people in the 20-24 age bracket and 23 in the 25-29 age bracket [2]

So suppose there are 5.5M people turning 21 every year. Giving them each $100k (yes, less than the Piketty proposal for the EU, but in the ballpark, and gives us round numbers) would cost $550B/yr at present. If this were funded as a flat wealth tax only on the top 1%, it would amount to around a 1.2% wealth tax, not accounting for evasion etc. So literally, 99% of the population could pay more in taxes, the 1% would be taking a hit, but honestly so long as long-term average returns are more than 1.2% above inflation, you could still have inter-generational wealth that gets bigger over time.

Of course, many would naturally prefer for a wealth tax to be progressive; the ultra-rich should pay a larger share than the pretty-rich. This would have the impact of shrinking long term dynastic piles of wealth, but not fully eliminating them, and reducing the impact on people at the low end of the 1%.

[1] https://www.federalreserve.gov/releases/z1/dataviz/dfa/distr...

[2] https://www.neilsberg.com/research/datasets/5fd2b2bb-3d85-11...

The top 1% of households in the US starts around $10M. That sounds like a lot, but consider it includes retirement accounts, value of a home etc.

For a couple in that bracket at about retirement age (and who might own their home and be expecting to retire on their savings), those people might be looking at a household income of $300-400K per year.

I don't know, but it seems pretty unreasonable to start hitting them with an extra $120K tax bill annually.

This is again the basic point that the other poster was making.

$10M sounds like a lot, because it is a lot.

It's so much that if you make the median US income, you have to make it for ~300 years -tax free- to save up $10M.

It's 50 years, tax free, on a good developer salary.

It's so much that with 5% interest rate you can pay those $120k in tax and still get $380k a year, placing you among the top 5% wage earners in the US, while doing nothing more than own.

Is so much, that when I dream about becoming independently wealthy, the amount I dream of is half of it.

For people in retirement age it's even more obvious that it's a lof of money. Like, how do you even spend that much money before you die?

As you probably understand by now, I definitely don't think it's unreasonable to hit them with an extra $120K bill a year, because $10M is a lot of money for any individual, or couple, to own.

I mean, sure if you completely ignore investment returns; otherwise your numbers are bogus.

The “safe” rate of retirement drawdown is generally accepted as 4% because inflation, bad years in the markets etc.

In case it isn’t obvious, taxing wealth is basically taxing the older people in society, because they had more of a chance to accumulate wealth.

Hitting people at retirement with a 25% marginal tax increase is just wrong and an unworkable policy proposal.

Piketty’s proposal may work in countries with functional pension schemes, but not in the U.S. where personal wealth accumulation is necessary to extent a solid middle class lifestyle into retirement.

Use 4% then. You're left with 280k (400-120) a year. That's 9 times the median US income, and very close to being in the top 5% income. Not to mention that capital tax is usually lower than income tax.

Even ignoring investment returns completely, $10M is enough for anyone to live extremely comfortable the rest of their life, just using this money!

Taxing the very rich (as the top 1% is) is reasonable, also when they are retired.

You speak as if the money itself can't be used, only the returns. As if it's somehow 'not a lot of money' if it's not possible to live indefinitely on the capital gains alone.

But I agree that it's unworkable, but only because this is a powerfull group (wealth is power after all). I think it's completely unrealistic for that reason alone. But it's a good idea, and $10M is a lot of money.

Would the crudest flat rate scheme be unappealing to people just above the threshold to which it applies? Sure. I don't think anyone's seriously advocating for Bezos and the successful small business owner to be paying the same rate.

AnthonyMouse created a strawman to fight; getting from "very wealthy" to "only the top 100 billionaires" is kinda crazy. To use that to assert that the math just doesn't work on using a wealth tax to fund universal inheritance is kinda untenable.

I think "wealthier than 99% of people in a rich country" is fair to call "very wealthy" but I can see how others would differ. I also hope you can see how the person with >10M in net worth would not be happy to pay 1.2% but can likely swing it (and under this crude hypothetical, stops paying it if they fall to merely being richer than 98.9% of their peers), but that the 100k would be life-changing and transformative for young people.

Piketty's proposals for a wealth tax have varied over the years, but have at points in the past included 1% above 1M euros, 2% above 5M euros, 5-10% above 1B euros. He's trying to re-imagine a more equal society; the redistribution can't be small.

> the top 1% in the US apparently have around $45.7T in wealth

"The top 1%" mostly isn't billionaires, it's cardiologists and lawyers and programmers. It's people who labor for money, not people who inherited it. Most of that wealth is their homes and retirement accounts.

This is the problem I have with these proposals: They get sold as applying to dynastic wealth but in actual fact end up applying to many people who sacrificed years of their lives to go to school or start a business.

> So literally, 99% of the population could pay more in taxes, the 1% would be taking a hit, but honestly so long as long-term average returns are more than 1.2% above inflation, you could still have inter-generational wealth that gets bigger over time.

That's the point. There is no reason to use a wealth tax instead of the existing taxes that we already have unless you're going to use a confiscatory rate.

Existing taxes could -- and already do -- generate enough revenue to fund that kind of program, if we would stop wasting the money on less efficient existing expenditures.

But a confiscatory wealth tax would be self-defeating. It would generate less money, because it would give the wealthy a perverse incentive to spend rather than invest, depriving the government of all the future tax revenue on their investment activity -- which long-term exceeds the amount of the principal.

You have to get at the problem from the other end. What you want isn't to make it harder for wealthy people to make money, it's to make it easier for ordinary people to make money. Reduce barriers to entry so anyone can start a business -- and that business can compete with dynastic incumbents, and dethrone them. Increase competitiveness of markets so capital gets lower margins and more of the surplus goes to customers and workers.

Just taking the money doesn't fix it. You have to address the structural economic conditions that led to that result to begin with.

But even if professionals have studied, inordinate wealth ought not be an entitlement, since it is a gateway to dynastic wealth via inheritance.

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